Buying a new home is exciting, but sometimes the timing of selling your current home and purchasing a new one doesn’t align. That’s where a bridge loan comes into play—providing short-term financing to help you secure your next home or pay off debt while you wait for your current home to sell.
What is a Bridge Loan?
A bridge loan is a short-term financing option that provides funding until you secure permanent financing; the loan typically lasts for a 6-month or year-long term. At Amerant Mortgage, bridge loans exclude payments from your departing residence when qualifying for a loan, enabling buyers to make offers independently of selling their current property. With flexible down payment and loan terms, this product offers flexibility and accessibility for seamless home transitions.
When Does a Bridge Loan Make Sense?
Bridge loans can be helpful in several situations, including:
1 . Purchasing in a Competitive Market
In a hot real estate market, sellers prefer offers that don’t depend on selling an existing home. But if you need the funds from your current home to afford your next one, a bridge loan can provide temporary financing while your home sells, making your offer more attractive.
2. Buying a Fixer-Upper
Some homes require significant repairs that may not meet traditional loan requirements. A bridge loan can provide the funds you need to complete the work if you’re purchasing a home that needs renovations before qualifying for standard financing.
3. Navigating Life Events
Divorce, medical events, and recent job changes can complicate home financing. If you don’t yet meet the required payment history for these funds to count as income, a bridge loan can help finance your new home while you transition through these life events.
4. Financing Large-Scale Renovations or New Construction
If your next home requires substantial rehab or is a new build, a bridge loan may be an option to cover costs until you secure long-term financing.
What are the advantages of a Bridge Loan?
1. Improved Qualification for the New Mortgage
Many bridge loan programs do not count the existing mortgage payment towards the borrower’s debt-to-income (DTI) ratio, making it easier to qualify for the new home loan.
2. Relish More Time to Move
Bridge financing allows you to transition at your own pace. There’s no rush, no compromises—just a smooth and stress-free move.
3. Preserve Your Investments:
Protect your hard-earned investments. Bridge financing allows you to avoid selling your assets to finance your new home purchase until your current home sells.
4. Skip Private Mortgage Insurance
If you don’t have enough saved for a 20% down payment, you might need PMI insurance. By utilizing a Bridge Loan, you can leverage your home equity to achieve a 20% down payment and eliminate PMI fees.
5. Freedom from Pre-Payment Penalties
Enjoy the ability to pay off your bridge loan early without prepayment penalties.
Let’s be honest – timing a home sale while buying another can be challenging. A bridge loan can be a valuable tool for homebuyers who need flexibility in their financing. It might be worth considering if you’re in a transition phase and need temporary financing!
Disclosures:
Bridge loans are limited, short-term financing and may include a balloon payment. Not available in all states. All information contained herein is for informational purposes only. Terms and conditions are subject to change at any time, and restrictions may apply. This is not a commitment to lend, and all loans are subject to approval. This is not legal advice and should not be construed as legal advice; seek the advice of legal counsel for any questions regarding the implications of this loan on divorce proceedings.
